This isn't the worst-case scenario for Cuba that some U.S. travel brands had feared but it is a step backward and doesn't offer any clear glimpse of a path forward.
President Donald Trump won’t entirely reverse former President Obama’s liberalized policies on Americans traveling to Cuba but he will tighten Treasury Department audits of trips to ensure they fall within the 12 approved categories and that money does not go to the Cuban government or military.
The Trump Administration does, however, intend to end individual people-to-people travel to Cuba for Americans, which was one of the 12 approved categories of travel under Obama’s Cuba travel policies. For U.S. citizens who have already booked an individual people-to-people trip to Cuba, the Treasury Department will be reviewing cases.
A White House official who requested anonymity said that the president’s revised Cuba policy “is very much a promise that he made, that he took seriously, that he kept,” during a media call on Thursday. “The basic policy driver was his concern that the previous policy was enriching Cuban military and intelligence services that contribute so much to the island.”
The Treasury Department will have 90 days to implement these changes, according to the Miami Herald, which was briefed on Trump’s planned announcement scheduled for Friday, and broke the news.
This policy would be similar to the previous policy which the Obama Administration eventually lifted, although the State Department was the government agency auditing and monitoring that travelers met requirements for Cuba.
Time will tell how severe the scrutiny would become and whether it would have a chilling effect on Americans’ travel to Cuba.
Other changes are possible, too. Still unclear is whether Americans in Cuba will be allowed to spend money at government-owned hotels and restaurants — and how visitors would even know what is government-owned.
Moving forward, U.S. government officials will need to craft a specific policy based on the presidential memorandum that will be announced on Friday and issue updated regulations.
“It is important to note that the actual regulations which will detail the scope and precise nature of the new regulatory regime will be drafted over the next 90 days,” Pedro Freyre, chair of the International Practice at the Akerman law firm and an expert on the U.S. embargo on Cuba, said in a statement. “While not as wide ranging as was originally feared by some of the U.S. business interests, the devil is in the details. It will be critically important to engage U.S. regulators as they go forward with the drafting of the guidelines to ensure that these are not overly burdensome to U.S. business.”
Last year, the Obama administration opened up Cuba to U.S. travelers essentially on the honor system — allowing travelers to self-report their trips’ purpose.
Senior White House officials who spoke to the media on Thursday confirmed that individual people-to-people travel to Cuba will go away under the new travel policy because it poses “the highest risk of abuse.” They did, however, confirm that group travel to Cuba would remain in place as an approved form of travel for Americans.
While these changes mean U.S. travelers will once again be required to go with a group or tour operator, the news isn’t being applauded by some tour operators. “First-off, we believe any U.S. citizen should go to Cuba,” said Terry Dale, president and CEO of the U.S. Tour Operators Association, which represents several U.S. tour operators in Cuba. “But we have members who offer itineraries for individual travel, so these changes will hurt some members.”
“Educational trips and so-called ‘people-to-people’ group exchanges will fall under greater scrutiny, with educational groups once again having to travel with a guide from a U.S. organization sponsoring the trip, a requirement the Obama policy had effectively eliminated,” the Miami Herald reported earlier.
Commercial flights and cruise sailings to Cuba will be allowed to continue, and travel and money sent by Cuban-Americans won’t be affected by the president’s new policy.
The official announcement of the new policies, which Trump is expected to make in Miami on Friday, also wouldn’t affect Americans who want to travel to Cuba and pay for an Airbnb stay, for example. But it will impact individual Americans who wish to stay in an Airbnb and are traveling under the individual people-to-people travel category.
The lone U.S. hotel company most impacted by the new policy is Marriott International, which currently operates a hotel in the country. The Treasury Department could choose to revoke the special approval the company was given last March to operate a hotel in Cuba, primarily because the company’s hotel deals are made directly with an arm of the Cuban military.
No changes to existing Obama-era policies will take effect until after the Treasury Department conducts an audit of all U.S.-Cuba business agreements that are currently in place.
There are no changes to current rules and restrictions on souvenirs such as rum and cigars that U.S. travelers can bring back from Cuba, an administration official also said during the call.
In October 2016, the Obama administration eliminated the $100 limit on the value of Cuban rum and cigars that U.S. travelers can bring back from the country. Cuban rum and cigars are subject to the same duties as alcohol and tobacco from other countries, meaning most people will be able to bring back as many as 100 cigars and several bottles of rum, for example.
Here’s a look at the various travel sectors and how changes in Cuba policy might impact them.
Hotels and Airbnb
For U.S.-based hotel companies, the impact of these restrictions could have some impact on business, but nothing significantly material for most hotel companies operating on the island. Hotels run by U.S. companies will be impacted most, and Airbnb is mostly unaffected by the new policy.
The only U.S. hotel company that currently operates in Cuba is Marriott, which inherited Starwood’s Cuba hotel agreements with the Cuban military’s Grupo de Administración Empresarial S.A. Gaviota division when it acquired the company in September. Marriott also received approval from the U.S. Office of Foreign Assets Control of the Department of Treasury to do business in the country in March 2016. Currently it is operating one property, a Four Points by Sheraton, and is planning to open its second soon.
With Trump’s new policy, Marriott’s hotel agreements could be in jeopardy, preventing Starwood’s operating license from being renewed.
“We are at an important moment in the relationship between the United States and Cuba,” Marriott International CEO Arne Sorenson said in a statement. “Travel between our two countries continues to increase and strengthen an evolving bilateral relationship. It would be exceedingly disappointing to see the progress that has been made in the last two years halted and reversed by the Administration. We have invested significant resources establishing a presence in Cuba, and with one hotel open and another in the pipeline we have just begun our work creating opportunity and a more vibrant tourism sector on the island.
“More importantly, as Cuba moves to reform its economy in the post-Castro era, American businesses should be present to lead by example. We urge the Trump Administration to recognize and utilize travel as a strategic tool in its efforts to improve relations with Cuba, allowing us to be part of a promising future, as opposed to reverting to the policies of the past.”
Eva-Maria Panzer, a spokeswoman for Kempinski Hotels, which just opened the Gran Hotel Manzana Kempinski La Habana in Cuba earlier this month said, “Of course we hope that trade and travel restrictions eased by the Obama government will not be tightened again by the current U.S. government. This would not be favorable for any kind of businesses connected to tourism such as cruise ship operators, airlines or hotel chains.”
For Sebastien Bazin, AccorHotels CEO, Cuba is important, but its scope and size doesn’t make it as large a market as other regions where he’s seeing tremendous opportunity for growth and development, he said at last week’s NYU Hospitality Industry Investment Conference.
“Cuba is a wonderful destination but let’s not kill ourselves; it doesn’t have the same size or capacity you can find in Asia-Pacific or Africa,” Bazin said. “For Accor, we have three properties [in Cuba], and we may open up another 10. It’s a wonderful destination. Great culture. Great people. But you’re dealing with the same ownership and same people so it’s tough. It’s a place where you have to spend time in order to get comfortable.”
Likewise, Mark Hoplamazian, CEO of Hyatt Hotels, said that his company is seeking to have properties there but the market can be challenging last week at the NYU conference.
“We’re in active discussions to find an opportunity or two that we can begin with. It’s not an easy process, but we’re committed to figuring out a way to do that. I don’t think we’re late in any way. The market is just evolving really slowly at this point.”
He added, “The tether to the U.S. is palpably strong and widespread. I agree with how Sebastien characterized it. It has tremendous headline appeal. Especially in the United States it’s got this mythical existence as this thing from yesteryear … but in reality, it’s a relatively modest market. It’s a very attractive market. It’s not that one that we want to ignore. My observation is that the market there is 100 percent inbound.”
Airbnb has operated in Cuba since April 2015 and according to Airbnb, the company has had 560,000 guest arrivals in its Cuban Airbnb listings ever since. In 2017, the company said the average number of guest arrivals for its homes in Cuba is 70,000, and Cuba is Airbnb’s fastest-growing country in the world based on listing growth, with more than 22,000 listings in total.
An Airbnb spokesperson issued the following statement: “Over the last two years, thousands of Airbnb guests from around the world have traveled to Cuba to share ideas, experiences, and cultures. Airbnb has helped individual Cuban people earn extra income and we have seen how travel can break down barriers and promote understanding. Travel from the U.S. to Cuba is an important way to encourage people-to-people diplomacy. While we are reviewing what this policy could mean for this type of travel, we appreciate that the policy appears to allow us to continue to support Airbnb hosts in Cuba who have welcomed travelers from around the world. We look forward to reviewing the details of the policy and speaking with the Administration and Congress about this issue in the weeks and months ahead.”
Beginning in April 2016, Airbnb was given access to allow travelers from around the world — not just the U.S. — to book an Airbnb listing when visiting Cuba. And on a recent media call, Airbnb’s head of public policy, Chris Lehane, said 81 percent of the platforms guests come from outside the U.S. In 2016, people who live outside of the United States accounted for 65 percent of all guest arrivals at Airbnb listings in Cuba.
Lehane penned a letter to Representative Tom Emmer and the Congressional Cuba Working Group members on June 6, thanking them for their support of improved U.S.-Cuba relations. U.S. Senators Jeff Flake, Mike Enzi, and John Boozman wrote to Secretary of State Rex Tillerson and National Security Adviser Lt. General H.R. McMaster on June 8, noting that more than half of Americans traveling to Cuba said they stayed in a private lodging in a recent survey.
The Herald reported U.S. airlines may continue flying to Cuba, but it’s unclear how many routes would be sustainable under the new paradigm.
Many Cuba routes already have been underperforming, especially those to cities other than Havana, said Seth Kaplan, managing editor of Airline Weekly, a trade publication. U.S. carriers knew Cuba was a long-term play, he said, but the market was taking longer to ramp up than expected. And that was under the Obama-era rules.
“Clearly, there is not a lot tourism there,” Kaplan said. “Because of all the ambiguity with what’s allowed and what’s not, the market of people who are willing to go to see the place is a pretty small market.”
Some airlines already gave up, including Silver Airways, a small Florida-based regional airline, and two ultra low cost carriers — Frontier Airlines and Spirit Airlines. Others, including American Airlines and JetBlue Airways, slashed flights or moved to smaller aircraft on some routes, mainly to cities other than Havana.
If the Trump Administrations decision makes it tough for Americans to visit Cuba, it’s possible airlines may have to cut more capacity. Then again, they might retain their flights, as more of a long-term investment in the island’s future.
Several U.S. carriers told Skift on Thursday it was too early to comment on their plans.
“We will review the policy once it is available to us, but as we do in all of the 22 countries we serve, we plan operate within the policies set by the government,” a JetBlue spokesman said.
The world’s three largest cruise operators — Carnival Corp., Royal Caribbean Cruises, and Norwegian Cruise Line Holdings — now call on Cuba with several of their cruise lines, and the new policy says they can continue to do so.
But what’s not clear is how the change will affect the experience for passengers or whether the prospect of greater scrutiny will scare people away.
Passengers have to select the reason for their trip on official forms when they visit Cuba, and typically explore in groups with a guide. But they are also allowed to choose a self-guided option and set out on their own.
Cruise lines have visits to Cuba scheduled through 2019. In a statement late Thursday, Carnival Corp. said the company is pleased that the changes would allow ships to keep sailing to the island.
“We will review the extent of the tightening of the travel rules, but our guests have already been traveling under the 12 approved forms of travel to Cuba since we undertook our historic first cruise to Cuba more than a year ago,” the company said. “Our experience in Cuba this past year has been extremely positive.”
Representatives from the other operators did not immediately respond to questions from Skift about whether those itineraries would change, or what might be different for passenegers in light of the new policy. Most expected to wait until the president’s formal announcement Friday before responding.
Earlier this month, when word started to emerge that Trump might roll back some of the measures that made travel to the island easier, spokespeople for cruise companies declined to speculate.
“Should something change in the future, we will make the necessary arrangements, but today, we remain focused on this new offering in the Caribbean that our guests booked to sail on future cruises to Cuba are very much looking forward to experiencing,” Norwegian Cruise Line spokeswoman Vanessa Picariello said in an email in early June.
Carnival Corp. was the first operator to send a ship from Miami to Havana in several decades a little over a year ago; the brand is planning cruises for Carnival Cruise Line and Holland America Line and has requested approval for other brands to visit. It has a lot of company this year as competitors have gotten permission from the Cuban government to visit.
Earlier this year, executives spoke openly about their concerns that the Trump administration might make decisions that would hurt their business.
“It can be a major force in the cruise business for years to come,” said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings. “I hope the administration sees that potential….and therefore would hesitate to roll back any of the Obama-era initiatives.”
While expectations — and prices for the limited number of sailings so far — have been high, Cuba is not yet a major force in the cruise business. Executives have said the number of sailings is so minor that the financial impact is essentially a drop in the bucket.
“The most important thing is positioning for the longer haul and positioning to lift overall demand and interest in the Caribbean — and ultimately because of that, create additional opportunity for capturing more of the value through increased yields,” Carnival Corp. President and CEO Arnold Donald said during an earnings call in December. “And so Cuba is a longer term play, but you have to build it today and that’s what we’re doing. But in terms of the financial impact on the corporation, you couldn’t find it probably.”
In late January, Royal Caribbean Cruises chairman and CEO Richard Fain told analysts that the addition of Havana had generated “superb booking activity” for the small number of trips that had been scheduled at that point.
“But the scale is trivial, representing less than 1 percent of our capacity,” he said. “We are encouraged that future prospects remain positive, but at this time the impact on our financials is marginal and it will be quite some time before this is even remotely material.”
When an analyst asked about potential changes by the new government in the U.S., Royal Caribbean International president and CEO Michael Bayley said the company would work with officials as it does around the world.
“We flex as the dynamics change,” Bayley said. “We’ll just adapt to what comes towards us.”
One would think that Cuba travel would be a boon for travel agents, for a variety of reasons. First, the complexity of navigating the people-to-people trip requirements can be eased by using a professional. Second, agents can provide information from a variety of trips ranging from cruises to tours and match their clients up with the right vacation. Third, having an agent on call if something goes wrong can allay the fears of travelers when going to a destination that has recently opened to U.S. travelers.
Interest in Cuba, however, hasn’t been exactly booming, according to travel agencies. Travel Leaders Group reported earlier in 2017 that 57.8 percent of the leisure agents it polled had yet to book a Cuba vacation; 23.3 percent of them said their clients haven’t expressed any interest in travel to Cuba.
If those traveling to Cuba are indeed limited to just one entry each year, it won’t represent a huge pain for agents. In fact, it could become a selling point for them; if travel companies pull back and there are fewer types of trips or flights available, agents can help navigate the challenges with less hassle for consumers.
Online Travel Agencies
In the days before Trump’s Cuba announcement Friday, major online travel agencies were being coy and loathe to speculate on what the President might do and what his potential actions might mean.
A TripAdvisor spokesperson said it was too early to comment.
In October 2016, TripAdvisor was the first online travel company to get a a license from the U.S.Treasury Department’s Office of Foreign Assets Control to do business in Cuba. The license enables TripAdvisor to facilitate the booking of flights, hotels, vacation rentals/short-term rentals, and attractions in Cuba.
The user review side of TripAdvisor’s business already had a presence in Cuba.
If Trump indeed rolled back travel to Cuba, the timing is ironic for Expedia Inc., which last month opened up its global points of sale, including Expedia.com, Hotels.com, Travelocity, Orbitz and CheapTickets, for the booking of hotels and home-sharing options in Cuba. Customers pay for their stays online at the time of booking.
An Expedia spokesperson didn’t have an immediate comment on Wednesday about the outlook for Cuba pending Trump’s announcement. Likewise the Priceline Group, which does business in Cuba, declined to comment.
With contributions from Brian Sumers, Hannah Sampson, Dennis Schaal, and Andrew Sheivachman.
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Photo credit: President Trump will make an announcement in Miami on Friday on the United States' official policy on Cuba. Pictured are JetBlue workers in Cuba last year. JetBlue